Another View: TARP covered auto bailout effectively

With the recent sale of the government's remaining shares in General Motors, the auto bailout is coming to an end, along with the broader financial rescue of which it was a part.

Rarely has a bill been so reviled. When the Troubled Asset Relief Program, or TARP, as it was known, was passed five years ago, critics said it would be money down the drain. "I fear that taxpayers may end up inheriting the mother of all debts," said Rep. Jeb Hensarling, R-Texas, now chairman of the House Financial Services Committee.

Rarely have the critics been so wrong. While parts of the bailout could have been handled better, overall it has to be counted as a major success.

Of the $700 billion initially authorized by Congress, $422 billion was spent. Of that amount, all but about $7 billion has been repaid. When the Treasury Department's remaining positions are unwound, TARP is likely to end up in the black.

Remember, TARP wasn't designed to be a profitable investment vehicle. It was designed to avert another depression. At the time, the world was facing such a horrific financial crisis that even blue-chip companies such as McDonald's and General Electric were having trouble getting loans to meet payroll. With private credit all but frozen, the federal government became the lender of last resort.

Though it is impossible to say what would have happened had TARP not passed, the omens were not good. And the economic record of the past five years, while far from ideal, could have been far worse.

TARP does have a distinct downside. It made explicit what had long been unspoken - that when the biggest banks take on too much risk and are about to fail, governments have little choice but to prop them up. But the economic pain necessary to make a lesson out of banks would have been far too great.

One clear indication of TARP's success is that the criticism has subsided. Support for the auto rescue, for example, jumped from 37 percent in 2009 to 56 percentin 2012, according to polling by Pew.

As things stand, the federal government will end up losing roughly $10 billion on the GM rescue once it unwinds its final position in Ally Financial, the former GMAC.

Why not recoup that loss now from the healthier GM and Chrysler, as some people have suggested? One answer is that it would be unfair to confiscate assets from current shareholders, who had nothing to do with the bankruptcy or the bailout. The loss is what it is: a blemish on the program brought on by the Obama administration's buckling to pressure from bondholders and labor unions.

Even so, a loss of $10 billion is far smaller than it could have been. The Center for Automotive Research, a Michigan think tank, estimates that had Washington not acted, the government would have lost $39 billion to $105 billion from uncollected tax revenue and increased expenses on unemployment benefits, pension reimbursements and welfare.

Historians will record that parts of TARP were poorly executed. But they are likely to conclude that, overall, it worked beyond expectations. This holiday season, employees of GM and Chrysler undoubtedly agree.

-USA Today

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Another View: TARP covered auto bailout effectively

With the recent sale of the government's remaining shares in General Motors, the auto bailout is coming to an end, along with the broader financial rescue of which it was a part.